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Kansas revenue questions prompt Bank of KDOT debate

Lawmakers tapped $1B earmarked for transportation since 2000

Mike King of the Kansas Department of Transportation

Kansas politicians and lobbyists sense the next six months of state revenue collections will serve as a telling forecast of whether state government leaders will move to dig more deeply into what is referred to by some as the Bank of KDOT.

Instability of state tax collections — revenue fell more than $300 million below expectations from April to June — and uncertainty whether Congress will adopt a long-term fix for federal appropriations to transportation programs have fueled anxiety among people invested in the Kansas Department of Transportation's 10-year, $8 billion T-Works program.

Mitigating state budget problems by withdrawing funding dedicated to KDOT has been a bipartisan tactic of legislators and Govs. Bill Graves, Kathleen Sebelius, Mark Parkinson and, most recently, Sam Brownback.

In the past 14 years, according to the Kansas Legislative Research Department, withdrawals from KDOT have totaled more than $1 billion.

"Every year we brace ourselves for a potential fight," said Michelle Butler, the top lobbyist for Economic Lifelines, a broad coalition of companies with an interest in the state's transportation network.

KDOT Secretary Mike King said he had not heard of internal Brownback administration discussion about the 2015 Legislature stripping funding allocated to T-Works, especially a portion of $478 million in Kansas sales tax revenue. He said, however, it would not be a surprise if the topic was raised anew.

"That happens every year," King said. "We're not concerned."

The idea of leaning on KDOT reserves to stabilize the general state government budget began under Graves, a Republican, when lawmakers took out a loan from the transportation agency.

Annual figures vary depending on the source, but the Kansas Legislative Research Department says that under Sebelius, a Democrat, transfers from KDOT expanded to about $35 million each year for the Kansas Highway Patrol and to provide a $5 million annual subsidy to lower airline ticket prices in Wichita. Commitments placed in state law to repay a portion of the funding were later scrapped.

During the height of the national recession, Sebelius and Parkinson, a Democrat, pulled more than $165 million from KDOT in successive years.

Under Brownback, withdrawals from KDOT dropped to $50 million annually for two years before exploding to $200 million last year and $168 million in the current budget year. The governor used a chunk to finance the state's Medicaid program, but more recently approved allocations of $55 million yearly to the highway patrol. He diverted $247 million to public education over the past two years.

King said every commitment made under T-Works had been met despite the money scramble. The agency found wiggle room due to lower-than-expected construction bids and modest interest rates on borrowing.

In part, project promises were maintained through issuance of bonds. Currently, KDOT's bond debt stands at $1.5 billion. That's 16 percent of the state's highway fund revenue total, slightly under the statutory maximum of 18 percent for outstanding KDOT bonds. Kansas is paying off debt at a rate of about $110 million each year.

If Republican leaders in the House and Senate or Brownback moved to siphon greater KDOT reserves, the proposal would be a tough sell to members of both political parties.

"It's not a good idea," said Sen. Vicki Schmidt, a Topeka Republican. "We have robbed the Bank of KDOT so many times."

T-Works mandated a minimum of $8 million be spent in each of the state's 105 counties, and Schmidt said a potential rewrite of project lists or schedules would be met with skepticism.

"There is no question in my mind Republicans are talking about this," he said. "It would devastate the T-Works program."

Sen. Les Donovan, a Wichita Republican serving on the Senate Transportation Committee with Schmidt and Hensley, said he would not be enthusiastic about a step backward in highway program funding. But he acknowledged the potential necessity of shifting money to meet more immediate obligations of state government.

"I run a business," the automotive dealer said. "When you absolutely have to have revenue, you have to make decisions you may not want."

Lawrence Rep. Tom Sloan, a Republican on the House Transportation Committee, said such a maneuver would conflict with Brownback's previous statements that KDOT should not continue as a reservoir for spending on features of state government with nothing to do with bridges or highways.

"The governor was adamant," Sloan said. "The governor wasn't going to allow raids on KDOT."

On Friday, Brownback’s budget director said in a news release Kansas government ended the fiscal year June 30 with $434 million on hand.

"This shows the continuing ability of Kansas to meet its obligations and to pay all of its debts on time and in full," said budget director Shawn Sullivan. "This administration continues to be in a strong fiscal position."

Sullivan didn't make reference to the latest budget projections that the state's cash reserves could dwindle to less than $40 million by the close of the current fiscal year in June 2015. That reality could force revenue or spending revisions by the 2015 Legislature, which reconvenes in January.